Us - that's who!

I am partnering with Neil Jensen and a few other like-minded people to start Steadyhand Investment Funds. We're hoping to open the doors in the first quarter of 2007, although the date will be highly dependent on the licensing process.

I'm sure people are waiting breathlessly for the next mutual fund company to start up. What is it  ... about the 421st one in Canada? For God's sake, why would we do such a thing? I will say that of the things I've considered doing since I left PH&N last year (unfortunately, the Champions Golf Tour wasn't an option), this is certainly the hardest by far.

So why? Because when I looked around the investment industry, the biggest opportunity I saw was providing a way to improve the returns of individual investors. Institutional clients, of which I am very familiar, are served well. Ultra-high net worth clients get what they need. But study after study shows that the individual investor is experiencing sub-par returns. And it has been a team effort - the clients, advisors and financial institutions have to share in the blame.

Steadyhand's "reason for being" is to help individuals be better investors. We want to break down all the things that are getting in the way of that happening. Such impediments as:

  • High fees and commissions
  • Short-term approaches to investing, which result in performance chasing and disastrous market timing calls
  • Poor alignment of interests between the client (overall portfolio returns) and the institution (asset gathering, profitability)
  • Funds designed to mirror the market indexes rather than make clients money

This will sound perverse, but we are using David Swensen's recent book "Unconventional Success - A Fundamental Approach to Personal Investment" as our inspiration. Mr. Swensen runs one of the world's most successful endowment funds for Yale University. In this book (his second) he takes a very dim view of mutual funds. The impediments I've listed above are essentially the reasons why he urges equity investors to only use low-cost index funds (i.e. Vanguard). He goes so far as to say that "rational mutual fund investors avoid active management". Mr. Swensen's book is inspirational to us because if we can reduce or eliminate the impediments that have caused him to say that, we'll have taken a huge step towards improving our clients' overall returns.

As I noted many times in the past, investors now have a vast array of options for investing in stocks and bonds (Yes, it all comes down to stocks and bonds). Most people would view this plethora of products (and firms) as a reason to not start Steadyhand. Maybe we're crazy, but we see it as an opportunity to simplify things for people and be a quiet, thoughtful shelter in the middle of all the industry noise.

For those who are interested, in the coming months we'll provide more details on Steadyhand Investment Funds right here.